Yuan reform continues apace

China Plans to Expand Yuan QFII Quota

Yao said at a financial forum in Hong Kong that the expanded quota will be mainly granted to the trading of A-share Exchange-traded fund (ETF) in Hong Kong exchange, saying the launch of A-share ETF will offer a instrument for RQFII to invest in the mainland stock market and boost the flow of yuan from overseas market to the mainland.

Here comes an actual A-share ETF backed by Chinese shares, rather than the existing derivative products.

Dim sum bonds and yuan loans to fire

Mainland companies are increasingly seeking to borrow in Hong Kong as unsettled equity markets deter stock sales. The yuan is expected to see the slowest growth since 2009 as shrinking economic growth curbs demand.

Sales of dim sum bonds, denominated in yuan, quadrupled to a record US$23.7 billion last year, exceeding the US$16.6 billion raised using Hong Kong dollar debt. The number of dim sum bond issuers jumped to 87 from 19 in 2010. Sales may rise to US$47.5 billion this year, according to analysts.

Interesting too see how this plays out with predictions of bankruptcy and default in a Chinese economic slowdown.

London in HK link-up to trade in yuan

As part of the tie-up with the City of London, the HKMA will extend the yuan real-time settlement system by five hours to 15 hours a day. It will close at 11.30pm by the end of June, instead of 6.30pm now. This will overlap the European markets that settle yuan trades in London.